Beyond Frontier: Russian ETFs to Cuban Art

While emerging and frontier markets have been rebounding lately with the recovery in oil, most investors will still be nursing big losses for the past year or more.

And the larger the loss, the heavier weighs the pain of forfeiting even more money on fees to fund managers.

On this week’s Emerging Opportunities show on Share Radio, Frontera’s Managing Editor Gavin Serkin looks at some alternative ways to invest with consultant Talib Qayyum, until recently vice president at Credit Suisse for exchange traded funds and other structured products.

Gavin: Just start by explaining what an ETF is, and how you begin the process of choosing an ETF? What do you look at?

Talib: An ETF is effectively just a wrapper, and in that wrapper, or this envelope, you have a basket of stocks, and that basket of stocks adds up to a value. It looks like a stock, trades like a stock that you buy on exchange.

- Advertisement -

The difference from a stock is that an ETF is a fund, so it has a management cost that goes to the fund manager. If you’re looking to buy an ETF, you’re looking for the lowest expense in terms of the ongoing management fee. You’re looking for the cheapest in terms of buying it on the exchange – there’s a difference between where you buy and where you sell, and you’re looking for the one with the narrowest spread.

There’s a plethora of ETFs out there run by the likes of Source, db X-trackers, iShares, and Vanguard. There are multiple options. The main thing to think about is cost. Keep the cost low.

Gavin: Okay, so have a look at the cost and also, I suppose, try to find an ETF that matches broadly what you’re looking at, in terms of your own investment horizons within emerging markets.

Talib: Absolutely, there are thousands of ETFs out there tracking lots of different benchmarks. So, you’ll find one on Brazil, you’ll find one on Russia, you’ll even find them on Argentina, the options are plenty. You do need to do some research with a local broker, but once you’ve decided that’s the kind of exposure that you want, you should then look through the available ETFs and find the ones with the lowest cost.

Gavin: Okay, so Talib is looking remarkably relaxed here, which has something to do with the fact that he’s been trekking around Panama, Colombia, Costa Rica and Cuba, taking in some of the beaches but also some of the investment areas as well. And your final port was Havana – a market that’s just opening up with the prospective lifting of US sanctions. But while most investors looking at Cuba think about real estate, maybe golf courses, hotels, you had your eye on art.

Talib: Yes. For your average Joe, buying a hotel, buying real estate is not an easy thing to do, so paintings are a natural accommodation.

Art isn’t something that people typically think of as an investment – and to be honest, it’s not. It’s one of those things that you like to have in your house, maybe you have an argument with your spouse about whether you should have it or not.

But the truth is that this is a country that has been closed off, and while there are some very well trained artists who have been there for a long time, and can produce some great quality work, they have no one to sell to. You’re getting some very interesting pieces from some very talented people on the cheap, effectively, compared to where you would elsewhere.

So far you haven’t had the American investor come in. You’ve had some private collectors start to buy some of these paintings. If you look outside Havana to other parts of the country, you’ll find some quite unknown artists where you can pick up a very good painting for $200, $300, which is already worth more if you were to try and buy something similar in London or New York.

Right now, the locals can’t afford to buy the art, but at some point they become wealthy and want to collect their own art.

On top of this, I found out on my travels that there are a lot of Latin Americans starting to buy the art as well, because they know it’s comparatively cheap. So, when it does open up, it will be an investment fad for the Americans or the New York collector.

To hear Gavin Serkin’s interview with Talib Qayyum, tune in to the Emerging Opportunities podcast here.